The Imperial West Innovation District is located near London’s White City. The project’s centerpiece is a 48,000 sq. meter ‘hub’ intended to support 1,000 students, researchers, and entrepreneurs through the Imperial College London.

Entrepreneurs at Startup Weekend London.

The project’s hub will use more than half of a £200 public investment by the United Kingdom to develop the cluster in support of a dense, innovative workforce, and a culture for startups.

Fostering a Startup and Innovation Ecosystemsuggests that governments can encourage entrepreneurs by providing hospitable regulation for operating and investing in startups. The UK’s premier entrepreneurial cluster will also be supported by taxes placed upon several of Silicon Valley’s most influential companies.

The UK government has followed other European nations by proposing targeted tax policies for Google, Facebook, and Apple– including a 25% tax on the ‘economic activity’ conducted by tech multinationals in the UK.

According to the Wall Street Journal, this so-called, ‘Google Tax,’ is structured to raise approximately £1 billion in tax revenue for the UK over the next five years; and like legislation in the EU, is directed at taxing companies that sell digital ad products overseas.

The revenue created by the UK’s prospective corporate taxes are intended to support startup policies developed by the government. London’s officials have been investing in the city’s startup community for several years, and are eager for additional funding.

“In 2010, aides to Prime Minister David Cameron stumbled across a cluster of British high-tech companies that were thriving despite the recession – and without any government aid,” Emma Vandore, an urban policy expert, wrote in the Lisbon Council. “Alerted to the potential of Silicon Roundabout, as the cluster is known, officials were quick to see the potential – and to take action. Within months, the Tech City Initiative was conceived and launched by [Prime Minister] Cameron.”

The UK government uses this kind of official patronage to generate excitement and legitimacy for London’s tech scene, and beyond Prime Minister Cameron, the Duke and Duchess of Cambridge have also been recruited to help promote London’s startup potential.

William and Kate, no strangers to the London tech scene, play with HP TouchPad at L.A. event

In contrast with an otherwise-strict immigration policy, the UK has recently offered regulatory support for an ‘entrepreneur’s visa’ as a way to attract startup talent from sluggish markets in Europe. According to Vandore, this policy was made possible through monthly breakfasts at 10 Downing Street, in which regulators and entrepreneurs discussed startup ecosystems.

London seeks to out-compete its European counterparts by cultivating a strategic, physical ecosystem for entrepreneurs and researchers to collaborate. It has accommodated foreign entrepreneurs who want to work at startups in the UK, and has piled on the support of regulators and academics alike.

But in its attempt to cater to startup businesses, the UK has also targeted tech multinationals (who invest heavily in entrepreneurship,) with a 25% tax rate, and this may reduce the willing participation of large companies in London’s startup community.

The question is, will such a tax help or hurt London’s startup ecosystem over the next ten years?

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